Verizon, MetroPCS net neutrality suit to proceed

A court challenge to the FCC's controversial net neutrality regulations will proceed after the D.C. Circuit Court of Appeals on Thursday dismissed the agency's request to delay the case.

The ruling is a largely procedural victory for Verizon and MetroPCS, who first filed suit over the open Internet rules last January. The operators claim that the FCC overstepped its authority in issuing the order, which passed by a 3-2 vote in December 2010.

The FCC had asked the suit be held in abeyance while it considered a petition for reconsideration filed by Southern Company Services to clarify the scope of so-called specialized services, which run on the same last-mile facilities as broadband Internet but don't receive the same protections as broadband under the net neutrality rules.

A three-judge panel dismissed the request, allowing the complaints to move ahead.

Stifel Nicolaus analyst Chris King expects the case to be set on the court's briefing schedule this spring, with oral arguments in the fall.

Verizon and MetroPCS declined to comment on the latest development in the case. Verizon stated in its complaint that the regulations are "arbitrary, capricious and an abuse of discretion … contrary to constitutional right and is otherwise contrary to law."

A spokesman for the FCC did not return interview requests by press time.

The original suits were dismissed on a technicality last spring when a court decided the complaints had been filed prematurely, since the FCC had not yet published its order in the Federal Register. The complaints were re-filed last fall after the regulations were posted in the Federal Register.

The contested open Internet regulations are less burdensome for wireless providers than for companies providing wireline broadband services and only require mobile operators to tell customers about data speeds and network management practices, along with a basic no-blocking rule stopping them from barring lawful websites and competing services, subject to "reasonable" network management practices.

AT&T, U.S. Cellular and T-Mobile USA have largely shrugged off the rules, saying it will be business as usual once they are in effect.

The FCC was forced to revise its net neutrality regulations in the wake of a 2010 court loss, when the U.S. Court of Appeals ruled it lacked the authority to force broadband providers to treat all network traffic equally.

That precedent could be problematic for the FCC, King said.

"The judges will still be bound by the precedent from the previous ruling, making the FCC's task difficult," he said.

The FCC's ability to regulate broadband providers could be seriously undermined if it loses the latest suit over its net neutrality rules.